Investors expect computech to begin paying dividends

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Reference no: EM131321651

NONCONSTANT GROWTH Computech Corporation is expanding rapidly and currently needs to retain all of its earnings; hence, it does not pay dividends. However, investors expect Computech to begin paying dividends, beginning with a dividend of $0.50 coming 3 years from today. The dividend should grow rapidly—at a rate of 35% per year—during Years 4 and 5; but after Year 5, growth should be a constant 7% per year. If the required return on Computech is 13%, what is the value of the stock today?

Reference no: EM131321651

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